JOTE 3 MATERIAL ACCOUNTING POLICIES
(a) Property, plant and equipment
i. Recognition and measurement
I tems of property, plant and equipment, are
measured at cost (which includes capitalised
borrowing costs, if any) less accumulated
depreciation and accumulated impairment
losses, if any.
Cost of an item of property, plant and
equipment includes its purchase price,
including import duties and non refundable
purchase taxes, after deducting trade
discounts and rebates, any directly
attributable cost of bringing the item to its
working condition for its intended use and
estimated costs of dismantling and removing
the item and restoring the site on which it is
located.
The cost of a self-constructed item of
property, plant and equipment comprises the
cost of materials, direct labour and any other
costs directly attributable to bringing the
item to its intended working condition and
estimated costs of dismantling, removing
and restoring the site on which it is located,
wherever applicable.
If significant parts of an item of property,
plant and equipment have different useful
lives, then they are accounted for as separate
items (major components) of property, plant
and equipment.
Any gain or loss on disposal of an item
of property, plant and equipment is
recognised in statement of profit and loss.
On transition to Ind AS, the Company
had elected to continue with the carrying
value of all Property, plant and equipment
measured as per the previous GAAP and use
that carrying value as the deemed cost of
Property, plant and equipment."
ii. Subsequent expenditure
Subsequent expenditure is capitalised only
if it is probable that the future economic
benefits associated with the expenditure will
flow to the Company.
iii. Depreciation
Depreciation on property, plant and
equipment (other than for those class
of assets specifically mentioned below)
is calculated on a straight-line basis as
per the useful lives prescribed and in the
manner laid down under Schedule II to the
Companies Act, 2013 and additions and
deletions are restricted to the period of use.
If the Management's estimate of the useful
life of a property, plant and equipment is
different than that envisaged in the aforesaid
Schedule, depreciation is provided based on
the Management's estimate of the useful
life. Pursuant to this policy, depreciation
on the following class of property, plant
and equipment has been provided at the
rates based on the following useful lives of
property, plant and equipment as estimated
by Management which is different from the
useful life prescribed under Schedule II of the
Companies Act, 2013:
*For these class of assets, the Management
believes, based on technical evaluation
carried out by them internally, that the useful
life as given above best represent the period
over which the Management expects to use
these assets. Hence, the useful life for these
assets is different from the useful life as in
Schedule II of the Act.
Freehold land is not depreciated.
The residual values, useful lives and methods
of depreciation of property, plant and
equipment are reviewed at each financial
year-end and adjusted prospectively, if
appropriate.
Depreciation on additions/disposals is
provided on a pro-rata basis, i.e., from/upto
the date on which asset is ready for use/
disposed off.
iv. Capital work-in-progress
Capital work-in-progress is stated at cost,
net of accumulated impairment loss, if any
(b) Intangible assets
Intangible assets are stated at cost less
accumulated amortisation and impairment.
Intangible assets acquired in a business
combination and recognised separately from
goodwill are initially recognised at their fair value
at the acquisition date (which is regarded as their
cost). Subsequent to initial recognition, intangible
assets acquired in a business combination are
reported at cost less accumulated amortisation
and accumulated impairment losses.
Intangible assets are amortised over their
estimated useful life on a straight-line basis as
follows:
An intangible asset is de-recognised on disposal,
or when no future economic benefits are expected
from use. Gains or losses arising from de¬
recognition of an intangible asset, measured as the
difference between the net disposal proceeds and
the carrying amount of the asset, are recognised
in 'other income’ of consolidated statement of
profit and loss when the asset is derecognised.
On transition to Ind AS, the Company had elected
to continue with the carrying value of all Intangible
assets measured as per the previous GAAP and
use that carrying value as the deemed cost of
Intangible assets.
Amortisation method, useful lives and residual
values are reviewed at the end of each financial
year and adjusted if appropriate."
(c) Biological assets
Biological assets i.e. living animals, are measured
at fair value less cost to sell. Costs to sell include the
minimal transportation charges for transporting
the cattle to the market but excludes finance
costs and income taxes. Changes in fair value
of livestock are recognised in the statement of
profit and loss. Costs such as vaccination, fodder
and other expenses are expensed as incurred.
The animals reared from conception (calf) and
heifers are classified as 'immatured biological
assets’ until the animals become productive. All
the productive animals are classified as "matured
biological assets".
(d) Impairment
i. Financial assets
In accordance with Ind AS 109, the Company
applies expected credit loss (ECL) model for
measurement and recognition of impairment
loss. The Company follows 'simplified
approach’ for recognition of impairment
loss allowance on trade receivables. The
application of simplified approach does not
require the Company to track changes in
credit risk. Rather, it recognises impairment
loss allowance based on lifetime ECLs at
each reporting date, right from its initial
recognition. For recognition of impairment
loss on other financial assets and risk
exposure, the Company determines that
whether there has been a significant increase
in the credit risk since initial recognition. If
credit risk has not increased significantly,
12-month ECL is used to provide for
impairment loss. However, if credit risk
has increased significantly, lifetime ECL is
used. If in subsequent period, credit quality
of the instrument improves such that there
is no longer a significant increase in credit
risk since initial recognition, then the entity
reverts to recognising impairment loss
allowance based on 12 month ECL.
ii. Non -financial assets
The Company's non-financial assets,
other than biological assets, inventories
and deferred tax assets, are evaluated for
recoverability whenever events or changes
in circumstances indicate that their carrying
amounts may not be recoverable. For the
purpose of impairment testing, assets that
do not generate independent cash inflows are
grouped together into cash-generating units
(CGUs). Each CGU represents the smallest
group of assets that generates cash inflows
that are largely independent of the cash inflows
of other assets or CGUs. Goodwill arising from
a business combination is allocated to CGUs
or groups of CGUs that are expected to benefit
from the synergies of the combination.
The recoverable amount (i.e. the higher of
the fair value less cost to sell and the value-
in-use) is determined on an individual asset
basis unless the asset does not generate
cash flows that are largely independent of
those from other assets. In such cases, the
recoverable amount is determined for the
CGU to which the asset belongs. If such
assets are considered to be impaired, the
impairment to be recognised in the statement
of profit and loss is measured as the amount
by which the carrying value of the assets
exceeds the estimated recoverable amount
of the asset. An impairment loss is reversed
in the statement of profit and loss if there
has been a change in the estimates used
to determine the recoverable amount. The
carrying amount of the asset is increased to
its revised recoverable amount, provided that
this amount does not exceed the carrying
amount that would have been determined
(net of any accumulated amortisation or
depreciation) had no impairment loss been
recognised for the asset in prior years.
(e) Leases
At inception of a contract, the Company assesses
whether a contract is, or contains, a lease. A
contract is, or contains, a lease if the contract
conveys the right to control the use of an
identified asset for a period of time in exchange
for consideration.
Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except
for short-term leases and leases of low-value
assets. The Company recognises lease liabilities
to make lease payments and right-of-use assets
representing the right to use the underlying assets.
i. Right-of-use assets
The Company recognises right-of-use assets
at the commencement date of the lease (i.e.,
the date the underlying asset is available
for use). Right-of-use assets are measured
at cost, less any accumulated depreciation
and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount
of lease liabilities recognised, initial direct
costs incurred, and lease payments made
at or before the commencement date less
any lease incentives received. Right-of-use
assets are depreciated on a straight-line
basis over the shorter of the lease term and
the estimated useful lives of the assets. The
Company’s lease asset classes primarily
consist of leases for buildings, leasehold land
and plant and machinery.
ii. Lease Liabilities
At the commencement date of the lease,
the Company recognises lease liabilities
measured at the present value of lease
payments to be made over the lease term.
The lease payments include fixed payments
(including in substance fixed payments)
less any lease incentives receivable, variable
lease payments that depend on an index
or a rate, and amounts expected to be paid
under residual value guarantees. The lease
payments also include the exercise price of
a purchase option reasonably certain to be
exercised by the Company and payments
of penalties for terminating the lease, if the
lease term reflects the Company exercising
the option to terminate. Variable lease
payments that do not depend on an index or
a rate are recognised as expenses (unless
they are incurred to produce inventories) in
the period in which the event or condition
that triggers the payment occurs.
In calculating the present value of lease
payments, the Company uses its incremental
borrowing rate at the lease commencement
date because the interest rate implicit in the
lease is not readily determinable. After the
commencement date, the amount of lease
liabilities is increased to reflect the accretion
of interest and reduced for the lease
payments made. In addition, the carrying
amount of lease liabilities is remeasured if
there is a modification, a change in the lease
term, a change in the lease payments (e.g.,
changes to future payments resulting from a
change in an index or rate used to determine
such lease payments) or a change in the
assessment of an option to purchase the
underlying asset.
iii. Short-term leases and leases of low-value
assets
The Company applies the short-term lease
recognition exemption to its short-term
leases of machinery and equipment (i.e.,
those leases that have a lease term of 12
months or less from the commencement
date and do not contain a purchase option).
It also applies the lease of low-value assets
recognition exemption to leases of office
equipment that are considered to be low
value. Lease payments on short-term
leases and leases of low-value assets are
recognised as expense on a straight-line
basis over the lease term.
(f) Inventories
Inventories comprise of raw materials and
packing materials, work-in-progress, finished
goods, stock-in-trade and stores and spares and
are carried at the lower of cost and net realisable
value. The cost of all categories of inventories
is based on the weighted average cost method
and includes expenditure incurred in acquiring
the inventories, production or conversion costs
and other costs incurred in bringing them to their
present location and condition. In the case of
manufactured inventories and work-in-progress,
cost includes an appropriate share of fixed
production overheads based on normal operating
capacity.
Net realisable value is the estimated selling
price in the ordinary course of business, less the
estimated costs of completion and the estimated
costs necessary to make the sale. The net
realisable value of work-in-progress is determined
with reference to the selling prices of related
finished products. The comparison of cost and net
realisable value is made on an item-by-item basis.
Raw materials, components and other supplies
held for use in the production of finished products
are not written down below cost except in cases
where material prices have declined and it is
estimated that the cost of the finished products
will exceed their net realisable value.
Goods-in-transit are valued at cost which
represents the costs incurred upto the stage at
which the goods are in-transit.
(g) Financial instruments
i. Recognition and initial measurement
The Company initially recognises financial
assets (excluding trade receivables) and
financial liabilities when it becomes a party to
the contractual provisions of the instrument.
Trade receivables are initially recognised
when they are originated.
ii. Classification and subsequent measurement
On initial recognition, a financial asset is
classified as measured at
- amortised cost;
- fair value through other comprehensive
income (FVOCI) - equity investment; or
- fair value through profit and loss
(FVTPL)
Financial assets are not reclassified
subsequent to their initial recognition, except
if and in the period the Company changes
its business model for managing financial
assets.
A financial asset is measured at amortised
cost if it meets both of the following
conditions and is not designated as at FVTPL:
- the asset is held within a business
model whose objective is to hold assets
to collect contractual cash flows; and
- the contractual terms of the financial
asset give rise on specified dates to
cash flows that are solely payments of
principal and interest on the principal
amount outstanding.
On initial recognition of an equity investment
that is not held for trading, the Company
may irrevocably elect to present subsequent
changes in the investment's fair value
in OCI (designated as FVOCI - equity
investment). This election is made on an
investment-by-investment basis.
All financial assets not classified as
measured at amortised cost or FVOCI as
described above are measured at FVTPL.
This includes all derivative financial assets.
On initial recognition, the Company may
irrevocably designate a financial asset that
otherwise meets the requirements to be
measured at amortised cost or at FVOCI as at
FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would
otherwise arise.
Financial assets
Financial assets carried at amortised cost
A financial asset is subsequently measured
at amortised cost if it is held within a business
model whose objective is to hold the asset in
order to collect contractual cash flows and
the contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest
on the principal amount outstanding.
Financial assets at fair value through other
comprehensive income
A financial asset is subsequently measured
at fair value through other comprehensive
income if it is held within a business
model whose objective is achieved by both
collecting contractual cash flows and selling
financial assets and the contractual terms
of the financial asset give rise on specified
dates to cash flows that are solely payments
of principal and interest on the principal
amount outstanding.
Financial assets at fair value through profit
or loss
A financial asset which is not classified in
any of the above categories are subsequently
fair valued through profit or loss. Dividend
income on listed equity investments are
recognised in the statement of profit and loss
as other income when the right of payment
has been established.
Financial liabilities
Financial liabilities are subsequently carried
at amortised cost using the effective
interest method. For trade and other
payables maturing within one year from the
balance sheet date, the carrying amounts
approximate fair value due to the short
maturity of these instruments.
Financial guarantee contracts
Financial guarantee contracts issued by the
Company are those contracts that require a
payment to be made to reimburse the holder
for a loss it incurs because the specified
debtor fails to make a payment when due
in accordance with the terms of a debt
instrument. Financial guarantee contracts
are recognised initially as a liability at fair
value, adjusted for transaction costs that
are directly attributable to the issuance of
the guarantee. Subsequently, the liability is
measured at the higher of the amount of loss
allowance determined as per impairment
requirements of Ind AS 109 and the amount
recognised less, when appropriate, the
cumulative amount of income recognised in
accordance with the principles of Ind AS 115.
Investment in subsidiaries and associate
Investment in subsidiaries and associate are
carried at cost less accumulated impairment
losses, if any. Where an indication of
impairment exists, the carrying amount of
the investment is assessed and written down
immediately to its recoverable amount.
iii. Derecognition
Financial assets
The Company derecognises a financial asset
when the contractual rights to the cash flows
from the financial asset expire, or it transfers
the right to receive the contractual cash flows
in a transaction in which substantially all of
the risks and rewards of ownership of the
financial assets are transferred or in which
the Company neither transfers nor retains
substantially all of the risks and rewards of
ownership and does not retain control of the
financial asset.
If the Company enters into transactions
whereby it transfers assets recognised on
its balance sheet, but retains either all or
substantially all of the risks and rewards of
the transferred assets, the transferred assets
are not derecognised.
Financial liabilities
The Company derecognises a financial
liability when its contractual obligations are
discharged or cancelled, or expire.
The Company also derecognises a financial
liability when its terms are modified and the
cash flows under the modified terms are
substantially different. In this case, a new
financial liability based on the modified terms
is recognised at fair value. The difference
between the carrying amount of the financial
liability extinguished and a new financial
liability with modified terms is recognised in
the statement of profit and loss.
iv. Offsetting
Financial assets and financial liabilities are
offset and the net amount presented in the
balance sheet when, and only when, the
Company currently has a legally enforceable
right to set off the amounts and it intends
either to settle them on a net basis or
realise the asset and settle the liability
simultaneously.
(h) Revenue recognition
The Company is engaged in sale of milk and milk
related value added products. Revenue from the
sale of goods is recognised when control of the
goods has transferred to the customers which is
either upon dispatch or upon receipt of goods by
the customer. At that point there are no unfulfilled
obligations that could affect the customer's
acceptance of the goods.
Income from services rendered is recognised
based on agreements/arrangements with the
customers and when services are rendered by
measuring progress towards satisfaction of
performance obligation for such services.
Revenue towards satisfaction of a performance
obligation is measured at the amount of
transaction price (net of variable consideration)
allocated to that performance obligation. Amounts
disclosed as revenue are net of returns, trade
discounts, cash discount, allowances and volume
rebates, taxes collected and amounts collected
on behalf of third parties. Revenue is recognised
to the extent it is probable that the economic
benefits will flow to the Company and the revenue
and costs, if applicable, can be measured reliably.
Contract balances
Trade receivables
A receivable is recognised if an amount of
consideration that is unconditional (i.e., only the
passage of time is required before payment of the
consideration is due).
Contract liabilities
A contract liability is recognised if a payment is
received or a payment is due (whichever is earlier)
from a customer before the Company transfers
the related goods or services. Contract liabilities
are recognised as revenue when the Company
performs under the contract (i.e., transfers control
of the related goods or services to the customer).
Interest income
For all financial instruments measured at
amortised cost, interest income is recorded using
the effective interest rate (EIR), which is the rate
that exactly discounts the estimated future cash
payments or receipts over the expected life of the
financial instrument or a shorter period, where
appropriate, to the net carrying amount of the
financial asset. Interest income is included in
other income in the statement of profit and loss.
(i) Earnings per share (EPS)
Basic earnings per share is computed by
dividing the net profit attributable to the equity
shareholders by the weighted average number of
equity shares outstanding during the year. Diluted
earnings per share is computed by dividing the net
profit by the weighted average number of equity
shares considered for deriving basic earnings per
share and also the weighted average number of
equity shares that could have been issued upon
conversion of all dilutive potential equity shares.
Dilutive potential equity shares are deemed
converted as of the beginning of the period,
unless issued at a later date. In computing diluted
earnings per share, only potential equity shares
that are dilutive and that either reduces earnings
per share or increases loss per share are included.
(j) Dividend
The Company recognises a liability to pay dividend
to equity holders of the Company when the
distribution is authorised, and the distribution is no
longer at the discretion of the Company. As per the
corporate laws in India, a distribution is authorised
when it is approved by the shareholders. A
corresponding amount is recognised directly in
equity.
(k) Foreign currencies
Transactions in foreign currencies are initially
recorded by the Company at their functional
currency spot rates at the date of the transaction.
Monetary assets and liabilities denominated in
foreign currency are translated at the functional
currency spot rates of exchange at the reporting
date. Exchange differences that arise on settlement
of monetary items or on reporting at each balance
sheet date of the Company's monetary items at
the closing rates, are recognised as income or
expenses in the period in which they arise. Non¬
monetary items which are carried at historical
cost denominated in a foreign currency are
reported using the exchange rates at the date of
transaction. Non-monetary items measured at
fair value in a foreign currency are translated using
the exchange rates at the date when the fair value
is determined.
(l) Government grants
Grants from the government are recognised
initially as deferred income at their fair value where
there is a reasonable assurance that the grant
will be received and the Company will comply
with all attached conditions. Government grants
relating to income are deferred and recognised
in the statement of profit and loss over the period
necessary to match them with the costs that
they are intended to compensate and presented
within other income. Government grants relating
to the purchase of property, plant and equipment
are included in non-current/current liabilities as
deferred income and are credited to statement
of profit and loss on a straight-line basis over the
expected lives of the related assets and presented
within other income.
(m) Income taxes:
Income-tax expense for the year comprise of
current and deferred tax. It is recognised in
statement of profit and loss except to the extent
that it relates to a business combination or to
an item recognised directly in equity or in other
comprehensive income ("OCI").
i. Current tax
Current tax comprises the expected tax
payable or receivable on the taxable income
or loss for the year and any adjustment
to the tax payable or receivable in respect
of previous years. The amount of current
tax reflects the best estimate of the tax
amount expected to be paid or received after
considering the uncertainty, if any related
to income taxes. It is measured using tax
rates (and tax laws) enacted or substantively
enacted by the reporting date.
ii. Deferred tax
Deferred tax is recognised in respect of
temporary differences between the carrying
amounts of assets and liabilities for financial
reporting purposes and the corresponding
amounts used for taxation purposes.
Deferred tax is also recognised in respect of
carried forward tax losses and tax credits.
Deferred tax is not recognised for:
- temporary differences arising on the
initial recognition of assets or liabilities
in a transaction that is not a business
combination and that affects neither
accounting nor taxable profit or loss at
the time of transaction.
- temporary differences related to
investments in subsidiaries, associates
and interests in joint ventures, when the
timing of the reversal of the temporary
differences can be controlled and it is
probable that the temporary differences
will not reverse in the foreseeable future.
Deferred tax assets are recognised to the
extent that it is probable that future taxable
profits will be available against which they
can be used.
Deferred tax assets recognised or
unrecognised are reviewed at each reporting
date and are recognised/reduced to the
extent that it is probable/no longer probable
respectively that the related tax benefit will
be realised.
Deferred tax is measured at the tax rates
that are expected to apply to the period when
the asset is realised or the liability is settled,
based on the laws that have been enacted or
substantively enacted by the reporting date.
The measurement of deferred tax reflects
the tax consequences that would follow from
the manner in which the Company expects,
at the reporting date, to recover or settle the
carrying amount of its assets and liabilities.
The Company offsets, the current tax assets
and liabilities (on a year on year basis) and
deferred tax assets and liabilities, where it
has a legally enforceable right and where it
intends to settle such assets and liabilities on
a net basis.
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